Miss Johnson: Notwithstanding the hon. Gentleman's point, we believe that the amendment would, for example, criminalise individuals who simply entered into a price-fixing agreement whether or not that agreement was already exempted, for example under EC law, and was therefore obviously a lawful agreement, and whether or not they have done so dishonestly, in the way I have described. It would also, for example, criminalise a business person entering an agreement on the basis of clear legal advice that it would be exempt under EC law.

We believe that a tightly drawn offence based on dishonesty is the appropriate definition for the new criminal offence. I think that that establishes the right focus on the wrongful nature of hard-core cartels. That is why we have selected the term ''dishonest'' in this context. I hope that I have explained to hon. Members, all of whom have contributed usefully to our discussion on the subject, why we have selected that word and that, in that light, the hon. Gentleman will withdraw his amendment.

Dr. Cable: Through the exchanges that we have had, I have realised that this subject is rather more important than I appreciated when I introduced it. We

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might want to refer to it again later or in another place. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Waterson: I beg to move amendment No. 139, in page 130, line 31, at end insert—

''(1A) An individual is only guilty of an offence under subsection (1) if he dishonestly agrees with one or more other persons to make or implement or cause to be made or implemented agreements which fall within section 2 of the 1998 Act and do not meet the criteria in section 9 of the 1998 Act''.

The Chairman: With this we may discuss the following amendments: No. 86 in page 130, line 32, leave out

''if operating as the parties to the agreement intend''.

No. 87, in page 131, line 20, at end insert—

''(8) It shall be a defence to the offence in section 179(1), if the arrangements in question:

(a) contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:

(b) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;

(c) do not afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question''.

Mr. Waterson: Amendment No. 139 is designed to tie the offence for individuals to a substantive infringement of competition law in the 1998 Act. I take no kudos for drafting it; it was one of the amendments put forward by the joint committee of the Law Society and the Bar.

The amendment seeks to avoid the problem that arises in the Bill that an individual could be convicted where the agreement in fact qualifies for exemption under section 9 of the 1998 Act. It is not sufficient, the joint committee says, to rely on the prosecution's discretion not to bring proceedings in such a case. The individual should not be at risk in that way. Moreover, the formula proposed in the amendment would prevent prosecutions being brought in cases in which the economic impact was insignificant. That is because in order to fall within section 2, the anti-competitive agreements must have what is called ''an appreciable effect'' on competition.

The Government have argued that linking the offence to the substantive competition infringement will result in economic arguments being adduced that juries will find difficult to consider. That is simply unrealistic. Economic arguments will be adduced by an individual in his defence from time to time to demonstrate that he was not acting dishonestly or that similar conduct had been approved by the OFT or the commission in other cases. The amendment seems a workmanlike attempt to protect potential defendants in such cases.

Amendment No. 86 would delete the words

''if operating as the parties to the agreement intend''.

It is sponsored by the CBI, which takes the view—I think it has a point—that if those words were not deleted, it would appear that the offence could in

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theory be committed even where the relative arrangements provided for in the agreement could not in practice lead to any of the consequences referred to in paragraphs (a) to (f). Should the agreement have any of those consequences unintentionally, the parties, presumably, would not be acting dishonestly.

Amendment No. 87, which is rather longer, is justified on the basis that if the cartel offence was finally introduced, the Government should, at the very least, entitle individuals to the right to rely on the provisions in article 81(3) of the EU treaty. It is true that the prohibition in that article relates to undertakings rather than to individuals, but as a matter of fairness, the same defence should be afforded under the UK regime. While I accept that the dishonesty approach taken by the Government has its merits, there should also be a provision modelled on article 81(3). I commend the amendments to the Committee.

Miss Johnson: The amendments would alter the definition of the offence in several ways; perhaps I can take them in turn. In responding to amendment No. 86, it might be helpful if I summarised the intended policy effect of the introductory words to the clause:

''The arrangements must be ones which, if operating as the parties to the agreement intend, would''—

and so on. That wording reflects the policy intention to criminalise dishonest agreements between individuals and to do so independently of whether their agreement is actually implemented as they intend—or at all—by their respective companies.

4.45 pm

Their intentions might not come to fruition. The companies might get wind of them and stamp on them. However, the individuals who reached the dishonest agreement would still have committed the criminal offence. That is right. The words that the amendment would remove clarify that policy intention. They do not provide for the criminalisation of agreements between individuals, if those agreements did not lead to their companies engaging in the types of activity described in paragraphs (a) to (f).

Amendment No. 87 would establish proof of the conditions for exemption in UK competition law as a statutory defence to the offence. The definition of the offence requires the prosecution to show that the agreement has been entered into dishonestly. That is likely to involve evidence of a failure to seek legal advice combined with attempts to disguise or hide activity, such as holding secret meetings and the absence or destruction of records.

In other words, the dishonesty approach is intended precisely to ensure that in practice bona fide business arrangements, which would be exempt under existing competition law, should be criminalised. Even within this definition, the prosecutors will wish to focus on the most serious cases where the dishonest intent of the parties is not in doubt.

Amendment No. 139 covers much of the same ground. It would provide directly that the offence would apply only to individuals who reached an agreement that would fall within chapter 1 of the

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Competition Act 1998 and would not be subject to an individual or block exemption. The amendment would not introduce a statutory defence, but many of the points that I have already made apply here, too. The Bill provides for a definition based on dishonesty and thus creates a tightly defined offence. The proposed amendment would add a further test, namely that the underlying agreement should be anti-competitive under existing competition law. In practice, I would expect any agreement that was ''dishonest'' to fall within that category anyway.

Certainly, the Serious Fraud Office would not prosecute if the agreement were not contrary to competition law. However, there is a fundamental problem with establishing linkage to existing competition law. We have of course considered the approach of a definition based on a direct link to article 81 of the EC Treaty, or on chapter 1 of the 1998 Act, which comes to the same thing for these purposes. That option was set out in last year's White Paper alongside the dishonesty option. It is superficially attractive, but would present major problems. The prosecution would need to prove beyond reasonable doubt, in every case, that the agreement would constitute a breach of EC or UK competition law to the satisfaction of a lay jury. I do not think that it is a trivial matter. I hope that the hon. Member for Eastbourne was not trivialising the difficulties in his remarks. It would inevitably draw in complex legal and economic argument that is not appropriate for a jury trial. The dishonesty approach avoids the need for the prosecution—

Mr. Waterson: I appreciate the Under-Secretary's point about complexity, particularly with jury trials. However, we are talking about offences for which people can go to prison for five years, in theory. That issue will be canvassed at great length in the stand part debate. Surely it is correct that, where there are appropriate safeguards and defences that we can make available to people in the structure of the Bill, we should seek to do so. This is a good example, is it not?

Miss Johnson: The dishonesty approach does avoid the need to prove the breach of EC law up front, but the defence can still argue that the agreement was exempt. That is an important fact to bear in mind about the way in which the provision is taken forward.

Mr. Waterson: That is precisely the point that I was making. As I understand it, if things are left as they are, the onus will be on the defence. Whereas the ''golden thread'', as it was once described, which runs throughout the English legal system is that the onus is on the prosecution in such cases, and it certainly should be, particularly when criminal sanctions are being imposed.